• Speaking at the 2nd National Farmers Festival in Awassa, capital of the Southern Regional State, this week, Prime Minister Meles urged farmers and development agents to scale up the gains achieved in agriculture. Underlining the need to allay the impact of the high cost of living, the Prime Minister emphasized the need to push the overall rate of economic growth even further. The Prime Minister honored some 676 model farmers and development agents for outstanding performances. He praised the farmers for their efforts and for what he called an unparalleled contribution towards registering yet another year of high economic growth, the fifth year in a row. Those honored, he said, were successful not only for themselves but for being an encouragement to others. The Prime Minister reiterated the government’s commitment to extend increased support to successful producers, whom he identified as agents of change in the on-going transformation of the nation. He was equally impressed by the performance of development agents who provide the support and advice on new technologies and agricultural know-how. Speaking on the occasion, Deputy Prime Minister and Minister of Agriculture and Rural Development, Addisu Legesse, said the appearance of a number of farming millionaires underlined the success of the agricultural sector.

• The AU’s Peace and Security Council has been meeting in Addis Ababa today to consider the Report of the Chairperson of the Commission on the Situation in Somalia. In July last year, the Council voted to extend the mandate of the African Union Mission in Somalia (AMISOM) for six months. It is now recommending that AMISOM’s mandate should be extended by another six months at the AU Summit to be held in Addis Ababa, at the end of this month. The Report, which covers events of the last six months, welcomes TFG moves towards reconciliation and the insistence of Prime Minister Nur Hassan ‘Adde’ that this would be at the core of his activities. The Report notes that newly trained and equipped Somali troops deployed in Mogadishu are having a positive effect on security. Indeed there have been almost daily improvements in the security situation recently in Mogadishu, though one result is that Al-Shabaab forces have been leaving the capital and attempting to spread their activities into previously peaceful regions outside the capital. The Report also draws attention to the increase in piracy and the continuing need for humanitarian assistance. The Report details the lack of progress in strengthening AMISOM. The financial and logistical support mobilized so far falls far short of requirements. Two battalions have been pledged by Burundi. One of them is expected to arrive in Mogadishu shortly; logistical assistance for the second battalion is still being organized. Details of deployment of the contingents pledged by Ghana (350) and Nigeria (850) are still under discussion. A UN team has been holding consultations with the AU over possible support for AMISOM. The Report, which identifies the TFG as the best chance in years to move towards peace and security in Somalia, also criticizes both Somalis and the international community for their failure to take advantage of the window of opportunity opened as a result of the Ethiopian intervention in December 2006. The Report recognizes that there has been progress towards peace and reconciliation but it identifies a number of specific problems: the earlier lack of harmony within the TFG; the failure to provide full deployment of AMISOM; and the lack of support from the wider international community. It also pinpoints the lack of regional cohesion, though it does not mention Eritrea by name nor mention Eritrea’s open efforts to undermine the TFG or its flaunting of AU policy and aims although these were mentioned in the subsequent discussions. The Report recommends all these factors should be addressed urgently. It also suggests the UN arms embargo should be reviewed to help the TFG build up its security forces, and that the Security Council should take the measures it declared in Resolution 1772, (2007) against those who threaten or use force against the Transitional Government Institutions or AMISOM. Humanitarian assistance should be stepped up and the UN Security Council should urgently authorize the deployment of a UN force to take over from AMISOM. One issue that was agreed by the Council in the subsequent debate was concern over the growing proliferation of initiatives over the peace process in Somalia. It was agreed that this needed to stop. The anchor of any peace process must be the Prime Minister, and the President, of the TFG. The responsibility of others is to help.

Meanwhile, Somalia’s new government convened in Baidoa for the first time last Sunday after Parliament had approved the new cabinet appointed by Prime Minister Nur Hassan ‘Adde’. It has 18 ministers, and five deputy ministers, down from 31 ministers in the previous government, half of them from outside Parliament. The formation of a new government has been widely welcomed. Britain’s Minister for Africa, Lord Malloch-Brown, called it a positive step which would allow the Transitional Government to turn its attention to advancing the political process in Somalia. The statement said that Britain now looked forward to the rapid and full implementation of last August’s National Reconciliation Congress, leading to a Constitutional process and meaningful fully inclusive political dialogue. Prime Minister Nur Hassan made it clear immediately after his appointment that he believed in the need for reconciliation and for talks with opposition. Clan elders in Mogadishu have welcomed his statements and emphasized that they recognize his authority. The UN Special Envoy to Somalia, Mr. Ahmedou Ould-Abdallah said this week that there were “almost daily telephone contacts” between government and members of the opposition. He said that he believed it would be useful for preliminary discussions between small groups to discuss ways to advance reconciliation. Sheikh Sharif Sheik Ahmed, the chairman of the opposition Alliance for the Re-liberation of Somalia, set up under Eritrean auspices last year, and based in Asmara, continues to insist that he does not recognize the TFG and dismissed claims that the Prime Minister had contacted opposition members in Eritrea. Mr. Ould-Abdullah recently visited Asmara where he talked to Somali opposition leaders as well as Eritrean officials, even though he had to wait three days before he was able to meet any Somalis.

• The Government of Ethiopia has reiterated its dismissal of the controversial ‘virtual’ demarcation of the Ethiopia-Eritrea border. This idea was first announced by the Eritrea-Ethiopia Boundary Commission in November 2006 which said this would come into operation at the end of November last year, failing any other progress in implementing demarcation on the ground. When the Commission dissolved itself on December 1st, it left behind its ‘virtual’ demarcation, a paper demarcation with no legal force or effect, contrary to international law and practice, and in violation of the object and purpose of the Algiers Agreements, and of the mandate of the Commission itself. In a statement yesterday, a Foreign Ministry spokesman described ‘virtual’ demarcation as a legal nonsense. It is neither valid nor acceptable in international law. Border demarcation requires lines drawn on the ground and pillars posted as the mandate of the Eritrea-Ethiopia Boundary Commission prescribes. Ethiopia made these points clear to the Commission when it first produced the concept in November 2006. Ethiopia has repeatedly made clear its full acceptance of the Delimitation Decisions of 13 April 2002 as binding on both sides. It is equally clear that it cannot accept the Commission’s Statement of 27 November 2006 as equally binding.

The Foreign Ministry’s statement came after Eritrea said it had accepted the ‘virtual’ demarcation of the border as announced by the Eritrea-Ethiopia Boundary Commission at the end of November. A statement published in an Eritrean government newspaper on Wednesday says that “after five years of revolving around the basic problem, the matter has finally been resolved through a virtual demarcation of the border”. The statement said Eritrea would pursue legal measures to evict Ethiopian soldiers from territory awarded to Eritrea under the 2002 Delimitation Decisions, but that if these “do not result in the appropriate outcome then the Eritrean people have other internationally approved choices”. The statement did not specify what these might be. In a letter to the President of the Security Council on January 15, President Issayas said that “the matter has now come to conclusion. The boundary is demarcated. In the event UNMEE has now been left, after five and half years, with no option other than ‘maintaining occupation’. My Government accordingly urges the Security Council to compel the evacuation of the army and institutions of the Ethiopian regime that are occupying our sovereign territories to prevent other unnecessary developments.” Again, he did not elaborate.

In light of these implied threats, many on the Security Council believe it would be appropriate for the UN Security Council to extend the mandate of the UN Mission to Eritrea and Ethiopia (UNMEE) for a further period. UNMEE’s current mandate runs out at the end of the month. UNMEE monitors the Temporary Security Zone set up to divide the two armies at the end of the war which began in May 1998 when Eritrea invaded Ethiopia. In the last three years, its operations have been seriously compromised by restrictions imposed by the Eritrean government. Eritrea has similarly violated the Algiers Agreements, which ended the war in December 2000, by the continuous dispatch of substantial military forces into the demilitarized Temporary Security Zone over the last couple of years. As noted, Ethiopia has consistently made clear its full acceptance of the Delimitation Decisions of April 2002 and its complete commitment to the demarcation of the border according to international norms and practices. Demarcation, however, cannot proceed while Eritrea fails to accept its obligations and restore the full integrity of the Algiers Agreements, and refuses to hold any dialogue over the exact placement of pillars and boundary markers. Ethiopia notified Eritrea last year of the legal and political options it has available should Eritrea continue to violate the integrity of the Algiers Agreements.

Meanwhile, the Eritrean government organized a demonstration on Wednesday outside the offices of the British Prime Minister, at 10 Downing Street. Despite claims by the organizers that demonstrators were from all over the Horn, most were Eritreans, though they did include representatives of several Eritrean-supported Ethiopian opposition groups, including the Ogaden National Liberation front and the Oromo Liberation Front, both now based in Asmara. The demonstrators demanded that the US and UK governments stopped co-operating with the Government of Ethiopia, a somewhat surprising demand since Eritrea supports, arms, and finances a dozen or so opposition movements from Ethiopia, as well as others from Sudan, Somalia and Djibouti, all involved in armed struggle or terrorist activity. While demonstrators claimed they had some 600 on the demonstration, British police counted the number as just over 100. The Eritrean government now appears to be shifting a significant part of its anti-Ethiopian efforts into media activity and the organizing of similar demonstrations in Europe and the United States.

• Early this week, an Eritrean government sponsored organization in the US, the Eritrean-American Organization, accused the Ministry of Foreign Affairs of calling Representative Donald Payne a “terrorist”. It went into this allegation at some length, claiming it to be typical of attempts by the Ethiopian government to slander its critics and opponents, and demanding an apology for Representative Payne. Most of the arguments in this piece, like many similar Eritrean propaganda effusions, are not worth comment. The Ministry of Foreign Affairs would, however, point out that this is a complete fabrication. The Ministry has made no such comments about Representative Payne, and that while it certainly disagrees strongly with Representative Payne’s absurd views on both Somalia and on Eritrea, it would most certainly not categorize him in this way.

• Professor Jeffery Sachs, Special Economic Advisor to the UN Secretary General, says that Ethiopia is well-placed to sustain double digit economic growth for the next two decades. Professor Sachs who was n Ethiopia this week said that Ethiopia’s growth rate of 11%-12% over recent years was one of the best in the world. It has been ignited by a combination of good policies, and private investment as well as conducive global conditions. This had allowed for the construction of new buildings and infrastructure, for farmers to make a significant amount of money and for a boom in exports of crops. Professor Sachs said the Agriculture Development-Led Industrialization (ADLI) policy provided an excellent basis of economic growth. Ethiopia, he said, can attract large-scale foreign investments across many sectors. He singled out agricultural commodities, agro-processing, leather goods, and food processing, suggesting that Ethiopia could be a major producer for Middle East markets. Professor Sachs was on a five day visit to Ethiopia during which he met Prime Minister Meles, the Deputy Prime Minister and Minister of Agriculture and Rural Development, Addisu Legesse and Health Minister Dr. Tewodros Adhanon.

Meanwhile, there are clear indications that the tax reforms the government is currently implementing are having tangible effects. In the World Bank’s latest report on business activity, "Doing Business 2008", Ethiopia is ranked as 29th for ‘Paying Tax’, a gain of two places on last year. The Bank's report covers regulations and practices in 178 countries on the basis of ten indicators, and ranks countries accordingly. The criteria are: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing businesses. The Bank says doing business in Ethiopia has become increasingly easy with improved facilitation of tax payments and improved administration. The report places Ethiopia in the category of those countries that have the least and lowest tax payment regulations. The number of tax payments per year in Ethiopia has been reduced to 20, the total time spent dealing with taxation, for all types of taxes, averages 198 hours, and the tax rate, as a percentage of gross profit, stands at 31.1%. These figures compare with an average for sub-Saharan Africa of 39 tax payments a year, of an average time of 316 hours dealing with tax payments, and an average tax rate of over 50%. The Report also ranks Ethiopia 58th out of 178 in dealing with business licenses, 107th in offering protection to investors, and 77th in the enforcement of contracts. All these categories show major improvements from the previous year. Coupled with the steady improvement in infrastructural services, security of property, and in governance as well as other macroeconomic conditions that ease business activity, this underlines the positive prospects for Ethiopia’s continued economic growth.

• The General Managers of the Fincha and Tendaho Sugar factories and the Board Chairman of Overseas Infrastructure Alliance of India signed a contract on 10 January 2008, agreeing to implement a line of credit, extended by the Government of India to Ethiopia, for a total of 640 million USD. This is for the development of the sugar industry in Ethiopia. The loan will be disbursed over a period of five years. This year the Government of India has committed itself to provide 122 Million USD; the remainder will be progressively disbursed over the next four years. The agreement will fund major developments for Ethiopia’s sugar industry. The Tendaho project, in the lower Awash Valley, in Afar Regional State, is a new project. On completion it is expected to have the capacity of 6 million quintals of sugar per annum. Funding will also be available for a major expansion at Fincha which will increase its capacity to 2.7 million quintals a year. In addition to funding, the agreement allows for OIA India assistance in the transfer of appropriate technology. The agreement was signed in the presence of Ato Girma Birru, Minister of Trade and Industry, Ato Sufian Ahmed, Minister of Finance and Economic Development, and Ato Shiferaw Jarso, Parliamentary whip for the EPRDF, as well as Mr. Gurjit Singh, Ambassador of India to Ethiopia and other officials. Mr. Singh said that the loan was the largest ever line of credit offered by India to any country.

• Ethiopia has agreed the details of a resumption of oil imports from Sudan, with the Sudanese government. Sudan’s Minister of Energy and Mining, Awad al-Jaz, met with Prime Minister Meles last week to discuss the acceleration of the project to provide Sudan with 100 MW of electric power, and the renewal of the agreement under which Ethiopia imports some 10,000 tonnes of fuel a month from Sudan. The World Bank is providing a $41 m. loan to implement the power line link which will run from Bahr Dar to the Sudan border at Metema. The line is expected to be completed within the next year or eighteen months. According to Ato Alemayehu Tegenu, Minister of Mines and Energy, Ethiopia is planning to export electric power to Sudan and Djibouti by 2010, and to Kenya by 2011. This will be preceded by the completion in 2009 of three major hydro-electric power projects, Beles, Gilgel Gibe, and Tekeze, which will generate 460MW, 420MW and 300MW respectively. Further projects are in the pipeline, and the aim is to increase capacity by eleven times. Initial agreements allow for the export of 200MW to Djibouti, 200MW to Sudan and 500 MW to Kenya. A feasibility study for transmission lines to Kenya should be completed shortly; and consideration is also being given to a 26 kilometer undersea link to export electricity to Yemen via Djibouti.

• This week is the “First Yemen Week in Ethiopia”. The Embassy of Yemen in Addis Ababa in collaboration with the Ministry of Culture and Tourism has organized a special celebration, January 16-20, to celebrate Yemen, as well as the occasion of the Ethiopian Millennium. The program comprises a Trade Exhibition, and cultural shows, including the presentation of a play by Yemeni Community school students in Addis Ababa, and folkloric music and dance concerts, as well as other events. The foundation stone of a Yemeni Cultural Center in Addis Ababa is to be laid, and there will be lectures at both the National Theatre and Addis Ababa University by Professor Abdullah Al-Sheiba and Professor Hussein Abdullah Al- Amri, member of the Shura council of the Republic of Yemen, respectively. The week is being attended by a substantial delegation from Yemen, headed by Dr. Yahya Bin Yahya Al-Motawakel, the Minister of Trade and Industry, Dr. Saleh Hussein Sumai, Minister of Immigrant Affairs, Mr. Hisham Ali Bin Ali, Deputy Minister of Culture, and Mr. Mohamed Abdo Said Ana'am, Chairman of the Yemeni Federation of Chamber of Commerce and Industry. Others attending from Yemen include businessmen as well as the members of various cultural groups and scholars.

• African Heads of State and Government will convene in Addis Ababa for the 10th Ordinary Session of the AU Assembly at the end of January, 31 January – 2 February. The summit has the theme "Industrial Development of Africa". Major agenda items will include the adoption of the 2008 budget, consideration of the reports of the Executive Council on the Audit of the Union and of the Ministerial Committee on the Union Government, the report on the activities of the Peace and Security Council and the State of Peace and Security in Africa as well as the AIDS Watch Africa (AWA) report. Discussions will also be held on the report of the Chairperson of NEPAD Heads of State and Government. The assembly is expected to elect and appoint the Chairperson and the Deputy Chairperson of the Commission as well as the AU Commissioners, though the process may, however, be affected by proposals that have already been raised in the Audit Report. The 10th Ordinary Session will be preceded by the 15th session of the Permanent Representatives Committee, 25-26 January, and by the meeting of the AU Executive Council, January 27-29, 2008.